When businesses need financing, they typically think of loans or merchant cash advances. But in the current economic climate, businesses need to retain as much revenue as possible. They need financing solutions that will not place debt on the books or come with a bunch of hidden fees.
The Case Against Debt-Based Financing
Debt-based financing has been around for as long as people have been doing business. Businesses take out loans and receive capital in exchange for debt and ongoing payments with interest. While the initial allotment of capital can be helpful, the impact a loan has on credit ratings and finances can do more harm than good. Lowered credit ratings can prevent businesses from getting further financing, while increasing the amount they pay on existing debts. More importantly, repaying the balance of a loan effectively splits revenue. This means that between regular overhead, payroll, and repaying the loan, businesses could find themselves in need of additional capital in short order.
Merchant Cash Advances and Hidden Fees
Merchant cash advances have been making the round as a flexible alternative to debt-based loans. A merchant cash advance (MCA) is supposed to be an injection of capital that does not place any debt on the balance sheet. On top of that, the payments are flexible instead of fixed, so businesses can repay the balance at their leisure. That seems very appealing until you look beyond the big selling points. Businesses repay the balance on merchant cash advances through a small percentage of sales receipts. However, the high interest rates on MCAs make it nearly impossible for businesses to pay off the principle before the terms are up, leaving them with a huge balloon payment at the end of the agreement. Additionally, there are hidden fees attached to each payment, along with penalties that are triggered if a business tried to pay off the balance early.
The Best Business Financing Solution
The best business financing solution is one that does not place debt on the books, impact credit scores, or saddle borrowers with lots of hidden fees. Invoice factoring is the one form of financing that offers all of the benefits without any of the negatives. With invoice factoring, businesses can unlock the revenue that is tied up in unpaid invoices by converting them to cash quickly and efficiently. This accelerates cash flow so businesses can build up the capital they need to cover expenses and grow, all without impacting credit ratings or placing debt on the books. There are no ongoing payments, because the transaction is a simple exchange of receivables for funds.
New Century Financial is the invoice company of choice for businesses because we do not lock clients into long-term contracts and there are no hidden fees. Most importantly, we are committed to converting invoices into cash and making funds available to you within 24 hours. Contact our offices today to get started.